Thursday, October 15, 2009

Guest Post: Get Your Hand Out My Pocket!!!

GUEST POST from "The Fed":


You know...I really want to believe that we live in the world that the conservatives THINK we live in.

It is a world were we must give tax breaks to the "job creators," infuse them with funds, and the money will trickle down to the middle class.

So let me get this right, you are going to give some of the greediest men in the world:
  • money
  • tax breaks, and
  • deregulation

And in return these men, with huge hearts and generosity, are going to do the right thing and provide goods and services at a lower price, and create jobs. All of which benefits middle Americans.

This, ladies and gentlemen, is called supply-side economics (generally). And in theory, it sounds beautiful!

Now, let's come back to reality. We all know that the richest 1% is basically a fraternity...and in that fraternity, they play games with each other like "Who has the longest yacht!"

**Side Note: And in case you are wondering, this isn't hyperbole. I know the manager of the largest yacht company in the area, and the LITERALLY play games like this....he built a yacht that came in UNDER cost (which was $1Million BTW) the customer pitched a fit because he wanted to tell his friends that he owned a million dollar yacht and MADE the company spend the rest of the money on make it a million dollar yacht. If you still don't believe me, do some research on Bernie Madoff and his "Bull" yacht.**

...sorry...back to my point...

Supply side economics and Reagan's "Trickle-down theory" are nice...but what happens when the people you give the money to decide to ..... keep the money?

It is my theory (and I am NOT an economist) that the money in today's struggling economy is the same as it was 5 years ago. The population in today's economy is the same as it was 5 years ago. So what happened?

Well...we are creatures of habit. We like what we like. And, without getting TOO outrageous, we will pay for it. For example, we went from paying $5 for movies to paying $10 for movies (and don't get popcorn and a drink, that is an extra $10). But, we LOVE our movies (and other products) so...we pay it. But the wages of the staff did not go up. Between 1997-2007 Minimum wage stayed at $5.15/hour.

So where did that money go? Anyone? Anyone? (Bueller?.....Buelller?)

I know we like to say it was the housing market that put us in our current economic position...and there is truth in that. There were people (whether by gov't force, or predatory lenders) taking out mortgages they couldn't afford. Of course houses (like the movies) were going UP in cost, while home-buyers' (like the theater staff's) salaries weren't going up. So again, we find ourselves in a position where we (the American public) paid more than the cost of something without fair compensation in return.

Between 1990 - 2005, CEO pay rose 298.2%, and corporate profits by 106.7%, by contrast, the average worker's pay has only risen by 4.3%.

It was reported today that JP Morgan (and others -namely Citibank) had large profits.

In 3 months, JP Morgan had a profit of $3.6 BILLION dollars! And while this week's jobless claims dropped (slightly), unemployment is almost at 10%! TEN PERCENT!!!!!

"Is that it?"
"No, there's more!"

Inflation - the general price of goods - is GOING UP!!!!

Pop Quiz!

There are 10 people in a room that has a line drawn right down the middle. 9 people are on one side of the line and 1 on the other. Each person has $10. If the 9, give the 1 $10, and 1 gives each of the 9 $1, who will end up with 90% of the money?

The Fed is an HBCU grad and currently resides in the DC/Baltimore area where he holds a position within the federal government working with standards and policy in Congress.
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